UPDATED 22:08 EST / AUGUST 08 2017

CLOUD

IBM sues former cloud CIO to prevent his joining Amazon Web Services

IBM Corp. is taking one of its former executives to court in a bid to stop him from starting a new job at its cloud rival Amazon Web Services.

Big Blue last week filed a lawsuit against Jeff S. Smith (pictured), the former chief information officer of its cloud computing business, alleging that he has breached a noncompete agreement that stipulates he must wait one year before joining a direct competitor. In addition, the lawsuit accuses the executive of misappropriation of trade secrets and breach of fiduciary duty.

If the accusations are true, it’s not difficult to see why IBM would be upset. AWS is IBM’s biggest rival in the cloud computing industry, and Smith is likely to have vital knowledge of the next-generation cloud computing technologies that IBM is building behind closed doors. Such knowledge would be extremely useful to AWS, which is widely considered to be the leading public cloud company.

Smith had served as the CIO of IBM’s cloud business since 2014. Before that, he held a similar position at an Australian bank. In March, he told his bosses at IBM that he was planning to take up a position with AWS the next month. IBM immediately objected, citing the noncompete agreement he had signed that prevents him from joining a rival within 12 months of his departure from the company.

IBM’s lawsuit states that Smith initially agreed to wait, pushing back his resignation to May at the same time. However in June, Smith suddenly announced he would begin working for AWS in August.

It’s not immediately clear why Smith and AWS believed he could do this without any repercussions from IBM. Then again, noncompete agreements are not always ironclad, as companies often negotiate with each other in such cases in order to allow employees to begin employment with a rival sooner than the agreement stipulates. If that’s the case with Smith, it could be that IBM is just playing hardball.

Even so, the allegations are quite serious. In its lawsuit, IBM claims that Smith held secret conversations with AWS Chief Executive Officer Andy Jassy before he departed the company. IBM further alleges that Smith revealed “inside information” about its plans during those conversations. IBM also says that Smith wiped his phone and tablet to prevent their learning about this.

IBM initially managed to secure a temporary restraining order preventing Smith from joining AWS until the case could be tried. However, AWS later secured an amendment to that order, allowing Smith to attend training at the company on the condition he does not seek out any customers, recruit staff or disclose confidential information.

The case will go to court Aug. 21, when a judge will decide if Smith must wait until May 2, 2018, to take up his new position at AWS. The judge will also rule on whether or not Smith has to return $1.7 million worth of shares in IBM that he received before he quit, as requested by the company.

Image: Jeff S. Smith/Twitter

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